"The least expensive kilowatt, is the one not used."

- Jacob Goldman

Data centers have traditionally been very high energy users particularly
because of the large electrical process load necessary to cool servers. Due to
their large electricity consumption, data center energy use is being closely
scrutinized by leading environment groups. Many data centers are currently
upgrading to energy efficient lighting and energy efficient HVAC and using
Internal Revenue Code Section 179D EPAct tax incentives to improve their energy
projects investment return. In addition data centers are increasingly utilizing
fuel cells supported by 30% tax credits/cash grants to generate a substantial
portion of their energy requirements.

In April of 2011, the Federal government announced that they were closing
over 100 underutilized data centers, specifically mentioning the opportunity
the save substantial electricity costs.

The Section 179D EPAct Tax Opportunities

Pursuant to Section 179D of EPAct and its underlying ASHRAE (American
Society of Heating Refrigeration and Air Conditioning) building energy code,
commercial buildings are eligible for energy efficiency tax deductions of up to
$1.80 per square foot. If a building’s energy reducing investment
doesn’t qualify for the full $1.80 per square foot deduction, then
deductions are available for any of the three major sub-systems, including:

1. Lighting

2. HVAC (Heating, Ventilation and Air Conditioning).

3. The building envelope.

Each component can qualify for up to 60 cents per square foot in EPAct tax
deductions. The building envelope is anything on the perimeter of the building
that touches the outside world including roof, walls, windows, doors, the
foundation and related insulation layers.

Alternative Energy Tax Credits and Grants

There are multiple 30% or 10% tax credits available for a variety of
alternative energy measures with varying credit termination dates. For example,
the 30% solar tax credit and 30% fuel cell credit expires January 1st 2017 and
the 10% Combined Power tax credit also expires January 1st, 2014. The 30%
closed loop and open loop biomass credit expires January 1st, 2014.

All alternative measures that are eligible for the 30% and 10% tax credits
are also eligible for equivalent cash grants for the three years staring
January 1st 2009 and ending December 31st 2011.

LED Lighting Tax Incentives

Low wattage LED lighting is becoming a very popular data center lighting
solution because LED's work well in cold environments and they measurably
reduce cooling costs related to hotter higher wattage previous generation
lighting technologies.

Chiller Tax Incentives

Data Centers less than 150,000 square feet that utilize chillers for HVAC
get special tax benefits under the EPAct tax provisions. These special benefits
arise because the EPAct tax calculation utilizes less efficient package units
in the ASHRAE reference data center building comparison as compared to
measurably more efficient central chillers.

LED Lighting/Chiller Combinations

Virtually all data center LED Lighting/ Chiller combinations for all data
centers less than 150,000 square feet buildings will qualify for at least a
$1.20 per square foot EPAct tax deduction and many will qualify for $1.80 per
square foot EPAct tax deduction. The following table presents the EPAct tax
deduction ranges for LED/chiller combinations starting at 50,000 square
feet.

Data Center LED/ Chiller Combined EPAct Tax Deductions

Large Data Centers

Large data centers consume vast amounts of electricity and can save
substantial operating costs and qualify for large EPAct tax deductions by
combining LED lighting and very energy efficient HVAC such as geothermal ,
thermal storage , and very high energy-efficient chillers.

The magnitude of EPAct tax deductions available to some of the larger data
centers and carrier hotels is presented below:

Potential EPAct 179D Tax Deductions for Large Data Centers

IRS Notice Rev Proc 2011-14

IRS notice 2011-14 enables data centers that previously missed eligible
EPAct tax deductions to recover these incentives for both new centers and
existing building data center conversion projects completed since January 1,
2006. This is particularly important notice for data centers because the data
center facility sector has experience explosive growth since January 1, 2006,
both for new data centers and for existing building conversions to data
centers.

Data Center Alternative Energy Tax Opportunities

The following table presents an example of data center geothermal
investment tax planning for the year 2011:

Data Center Geothermal Tax Planning Example 2011 Tax Year

Fuel Cells

Fuel cells convert chemical energy into electric energy through use of a
reactant (hydrogen fuel cells use hydrogen as a reactant) and an oxidizing
agent. Combustion is not involved in this process, making fuel cells quite
environmentally friendly.

The following example illustrates the potential incentives related to the
2011 year $2,000,000 fuel cell investment with a $800,000 utility rebate.

Fuel Cell Tax Planning Example

Conclusion

In an information technology driven economy data centers have become a fast
growing facility category. Data centers use substantial amounts of electricity
and now find themselves under the microscope regarding energy consumption. New
energy LED lighting technologies and high efficiency chillers can materially
reduce energy use in these facilities. Fuel cells are becoming an increasingly
popular way to supply on site electricity to these facilities. All three
upgrades meaning LED lighting, high energy efficiency chillers and fuel cells
typically qualify for large tax savings.